How can I create a product key for my C# application?

You can do something like create a record which contains the data you want to authenticate to the application. This could include anything you want - e.g. program features to enable, expiry date, name of the user (if you want to bind it to a user). Then encrypt that using some crypto algorithm with a fixed key or hash it. Then you just verify it within your program. One way to distribute the license file (on windows) is to provide it as a file which updates the registry (saves the user having to type it).

Beware of false sense of security though - sooner or later someone will simply patch your program to skip that check, and distribute the patched version. Or, they will work out a key that passes all checks and distribute that, or backdate the clock, etc. It doesn't matter how convoluted you make your scheme, anything you do for this will ultimately be security through obscurity and they will always be able to this. Even if they can't someone will, and will distribute the hacked version. Same applies even if you supply a dongle - if someone wants to, they can patch out the check for that too. Digitally signing your code won't help, they can remove that signature, or resign it.

You can complicate matters a bit by using techniques to prevent the program running in a debugger etc, but even this is not bullet proof. So you should just make it difficult enough that an honest user will not forget to pay. Also be very careful that your scheme does not become obtrusive to paying users - it's better to have some ripped off copies than for your paying customers not to be able to use what they have paid for.

Another option is to have an online check - just provide the user with a unique ID, and check online as to what capabilities that ID should have, and cache it for some period. All the same caveats apply though - people can get round anything like this.

Consider also the support costs of having to deal with users who have forgotten their key, etc.

edit: I just want to add, don't invest too much time in this or think that somehow your convoluted scheme will be different and uncrackable. It won't, and cannot be as long as people control the hardware and OS your program runs on. Developers have been trying to come up with ever more complex schemes for this, thinking that if they develop their own system for it then it will be known only to them and therefore 'more secure'. But it really is the programming equivalent of trying to build a perpetual motion machine. :-)

Who do you trust?

I've always considered this area too critical to trust a third party to manage the runtime security of your application. Once that component is cracked for one application, it's cracked for all applications. It happened to Discreet in five minutes once they went with a third-party license solution for 3ds Max years ago... Good times!

Seriously, consider rolling your own for having complete control over your algorithm. If you do, consider using components in your key along the lines of:

• License Name - the name of client (if any) you're licensing. Useful for managing company deployments - make them feel special to have a "personalised" name in the license information you supply them.
• Date of license expiry
• Number of users to run under the same license. This assumes you have a way of tracking running instances across a site, in a server-ish way
• Feature codes - to let you use the same licensing system across multiple features, and across multiple products. Of course if it's cracked for one product it's cracked for all.

Then checksum the hell out of them and add whatever (reversable) encryption you want to it to make it harder to crack.

To make a trial license key, simply have set values for the above values that translate as "trial mode".

And since this is now probably the most important code in your application/company, on top of/instead of obfuscation consider putting the decrypt routines in a native DLL file and simply P/Invoke to it.

Several companies I've worked for have adopted generalised approaches for this with great success. Or maybe the products weren't worth cracking ;)

If you are asking about the keys that you can type in, like Windows product keys, then they are based on some checks. If you are talking about the keys that you have to copy paste, then they are based on a digitial signature (private key encryption).

A simple product key logic could be to start with saying that the product key consists of four 5-digit groups, like abcde-fghij-kljmo-pqrst, and then go on to specify internal relationships like f+k+p should equal a, meaning the first digits of the 2, 3 and 4 group should total to a. This means that 8xxxx-2xxxx-4xxxx-2xxxx is valid, so is 8xxxx-1xxxx-0xxxx-7xxxx. Of course, there would be other relationships as well, including complex relations like, if the second digit of the first group is odd, then the last digit of the last group should be odd too. This way there would be generators for product keys and verification of product keys would simply check if it matches all the rules.

Encryption are normally the string of information about the license encrypted using a private key (== digitally signed) and converted to Base64. The public key is distributed with the application. When the Base64 string arrives, it is verified (==decrypted) by the public key and if found valid, the product is activated.